Banker, in Deal of Career, Avoids 3rd Trial

On an overcast fall day three years ago, prosecutors kicked off a string of high-profile white-collar crime cases with two marquee trials -- one against Tyco International executives and one against Silicon Valley’s star investment banker, Frank Quattrone.

One of those cases now appears to have been doomed from the start.

Although the Tyco executives were eventually convicted and sentenced to lengthy prison terms, a smiling Quattrone walked out of federal court in Manhattan on Tuesday with a deal expected to lead to a dismissal of all charges against him.

The settlement lets the 50-year-old financier avoid a third criminal trial and clears the way for him to resume his high-wattage career as a deal maker in Silicon Valley, where he helped manage the initial public stock offerings of numerous prominent technology companies, including Amazon.com Inc., Netscape Communications Corp. and Cisco Systems Inc.

“I’m very pleased that the case will be concluded, and I look forward to the formal dismissal of all charges,” Quattrone said in brief comments after the hearing.

The settlement was welcomed in Silicon Valley, where Quattrone supporters have long contended that the investment banker was a scapegoat for problems associated with the dot-com boom.

“They tried to make him the poster child for the excesses of the late ‘90s and early 2000,” said Sandy Robertson, a venture capitalist who founded the now-defunct Robertson Stephens technology investment bank.

In hindsight, many legal analysts say, Quattrone probably should not have been charged with criminal wrongdoing. They contend that prosecutors brought a case with scant evidence because they were under pressure to demonstrate a get-tough approach to headline-making fraud at Enron Corp., WorldCom Inc. and other companies.

Prosecutors felt compelled “to file some case involving high-level corporate criminality, but they weren’t ready to proceed on major cases, primarily Enron,” said George B. Newhouse Jr., a partner at Thelen Reid & Priest in Los Angeles. “So they grabbed for low-hanging fruit, but the case wasn’t there.”

U.S. Atty. Michael Garcia issued a one-sentence statement: “A deferred prosecution of the case against Frank Quattrone is an appropriate resolution of the case in light of all of the facts and circumstances and the posture of the case at this time.”

Quattrone’s agreement with the U.S. attorney’s office in Manhattan calls for the three counts against him -- obstruction of justice and two related charges -- to be dismissed in a year as long as he did not violate any laws in that time.

The settlement could hardly be better for Quattrone, experts said. There was no admission of wrongdoing, jail time or financial penalty.

“The government is trying to save face” by not dismissing the charges outright, said Kirby Behre, a former federal prosecutor now in private practice at Paul Hastings Janofsky & Walker. “It seems like a complete victory for the defense.”

In the three years since Quattrone was first brought to trial, federal and state prosecutors have won a series of key cases against corporate figures, including lifestyle mogul Martha Stewart, Bernard J. Ebbers of WorldCom, L. Dennis Kozlowski and Mark Swartz of Tyco and Jeffrey K. Skilling and the late Kenneth L. Lay of Enron.

But the Quattrone case, legal experts say, was hampered from the start by a lack of strong evidence.

Prosecutors alleged that Quattrone was trying to coax his team to destroy documents sought in investigations by the Securities and Exchange Commission and a federal grand jury into whether his employer, Credit Suisse First Boston, solicited kickbacks from big investors who were allotted low-priced shares in lucrative public offerings.

The charges revolved around an e-mail Quattrone sent to his staff in December 2000, when he ran Credit Suisse’s technology investment-banking group in Palo Alto. In a two-line missive, he encouraged subordinates to comply with an e-mail sent by another banker a day earlier to “clean up” their files.

Quattrone sent the note two days after being told about the grand-jury probe and a few hours after being advised to hire his own defense lawyer. He maintained that he dashed off the e-mail innocently as he rushed home for the day.

Prosecutors countered that Quattrone was worried about the deepening investigations and was desperate to save his career. But many experts say his brief comment was simply too thin to hang the case on.

“The charges were clearly flawed from the beginning,” said Jan L. Handzlik, a corporate-crime defense lawyer at Howrey in Los Angeles. “The government tried to do an end run around underlying allegations involving hot IPOs. They took the seemingly easy way out by charging an obstruction case, but it didn’t work.”

Quattrone’s first trial ended in a hung jury, but he was convicted in a second trial in May 2004. A federal appeals court overturned the conviction in March of this year, ruling that the judge gave the jury faulty instructions.

Roger McNamee, a veteran venture capitalist and principal of Menlo Park-based Elevation Partners, said he believed prosecutors had tried to find one person on whom to pin the excesses of the tech-stock boom of the late 1990s, which ended with a devastating market plunge that ravaged many investors’ portfolios.

McNamee said the case against Quattrone angered many Silicon Valley veterans. In their view, it smeared the reputation of someone who had played a key role in cementing the region’s status as the technology capital of the world, beginning in the 1980s.

“When you look at the history of the valley, Frank Quattrone believed in it the way no one else did,” McNamee said. “He understood the issues that entrepreneurs faced. He was an incredible counselor to his companies.”

Over 23 years as an investment banker, Quattrone oversaw 175 initial public offerings that raised $65 billion by his own count. His work also netted him rich rewards. In 2000 alone, Quattrone earned $120 million, according to evidence presented at his first trial.

Despite the favorable settlement, Quattrone was forced to give up his work and spend years defending himself against charges, noted Kirk Hanson, executive director of the Markkula Center for Applied Ethics at Santa Clara University.

“Frank Quattrone paid a price. No one in the valley wants to go through the several years of legal struggles that he did, even if it ended relatively well,” Hanson said.

Quattrone’s friend Peter Giles, however, said he recently saw the financier in Hawaii and said he appeared “very upbeat and very optimistic.”

“He looks the best I’ve seen him in years,” Giles said.

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Times staff writers E. Scott Reckard in Orange County, Tom Petruno in Los Angeles and David Streitfeld in San Francisco contributed to this report.